What is Bitcoin and Why Should You Care?
Ok, you’ve heard about bitcoin and you want to know what it does, right?
Lots of people will give you lots of answers. Beauty is in the eye of the beholder. Or ugliness, depending on your perspective.
I have only one answer, but it’s a big one.
Bitcoin solves a very specific problem with money: you need somebody to vouch for it.
You need some way for others to know your money is real, authentic, and worth what you say it is. You can’t just give somebody a piece of paper and expect them to accept it. You need some authority to guarantee its value.
Ideally, that “somebody” would be competent, honest, fair, and trustworthy. It would treat everybody equally and never change the terms of its agreements. It would preserve the value of that money and make sure you can exchange it freely.
Sometimes it does.
Usually, it doesn’t. You know what they say about money and power, right?
Humans have found many solutions to this problem. For example, governments, settlement companies, clearinghouses, laws, courts, contracts, and oaths.
All those solutions come with risks, costs, complexity, and the chance of human error. All can be corrupted. None can be scaled. It’s hard and expensive to get the “right” outcome every time.
With bitcoin, you can have trustworthy money without a central authority.
Bitcoin’s computer program ensures everybody follows the same rules and its blockchain guarantees every action will get the result it intends. Any attempt to change a transaction will fail. It’s all mathematically verified and easy to prove. As long as you trust math, you can trust bitcoin.
Meanwhile, its money system remains predictable and uniform forever—because it is hard-coded to do so. Nobody can change that.
As a result, you no longer need to rely on government decrees, local regulations, or the good faith of strangers. You can safely transact with millions of people who you have never met, with whom you have no relationship, who live in a country with different laws and regulations.
On top of that, you can build processes and workflows that use bitcoin’s blockchain to settle all sorts of transactions. It’s one source of truth, open for all to see and use anywhere, anytime, for any reason.
No other form of money can run the computer code that powers bitcoin’s network.
Why Bitcoin Matters
Why does this network use bitcoins instead of dollars?
Because dollars are valid in only some countries. Also, their value changes based on the U.S. government’s monetary policy. Also, what happens if the U.S. disappears or the dollar fails? Countries come and go and currencies get replaced. Computer code is eternal.
Bitcoin has a fixed monetary policy. As a result, it needs its own currency, even if just to give everybody a single way to keep track of everything.
In a digital world, where anybody can fake anything and your wealth can get wiped away with a single keystroke, you need a secure and reliable way to preserve your money and the proof that it’s yours—even if you live in a developed economy with a well-meaning government.
Bitcoin’s open, permissionless nature lets anybody send money instantly. Its monetary properties make it an excellent hedge against inflation and budget deficits. Its computer code lets developers and entrepreneurs build payment services, accounting platforms, and identification systems at a global scale without massive investments in infrastructure and business networks.
All Solutions Have Problems
Are there problems with bitcoin?
Yes, of course. All solutions have problems. This usually does not keep people from using them
The car engine is 150 years old and still sucks. Man-made electrical power is even older and causes all sorts of problems. Some say wireless technology has destroyed our society.
Even the wheel has its limitations.
Fortunately, bitcoin has a growing community of developers and engineers working to make it better, faster, cheaper, and easier to use.
When every person on earth can patch into bitcoin’s payment network, tinker with bitcoin’s code, and use bitcoin for any purpose its code will allow, the possibilities are endless.
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